Dont Let This Happen to You 2005

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Summary Table of Contents

IntroductionLetter from Acting Assistant Secretary for Export Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1Export Enforcement Introduction and Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Export Control Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Responsible Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Consequences for Violating The EAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Chapter 1 - Export License Requirements Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Criminal / Administrative Case Examples

Dr. Thomas Butler / The Plague Bacteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Omega Engineering Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Worldwide Sports & Recreation, Inc. / Bushnell Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Honeywell International Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Xinjian Yi and Yu Yi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Silicon Graphics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Midway Arms Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Morton International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Roper Scientific, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Molecular Probes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Reliance Steel & Aluminum Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10W.R. Grace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Hamilton Sundstrand Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Flint Hill Resources L.P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Compaq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Chapter 2 - License ConditionsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13Criminal / Administrative Case Examples

Global Dynamics Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13Sun Microsystems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Chapter 3 - Deemed Export Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15Criminal / Administrative Case Examples

Suntek Microwave, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15Fujitsu Network Communications, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16Pratt & Whitney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16New Focus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16Lattice Semiconductor Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

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Chapter 4 - State Sponsors of TerrorismIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17Criminal / Administrative Case Examples

OTS Refining Equipment Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173-G Mermet Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Dosmatic U.S.A., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Bio Check, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18E.H. Wachs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19Oerlikon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19Industrial Scientific Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Chapter 5 - Transshipment and Re-exportsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Criminal / Administrative Case Examples

Ebara International Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Lam Research Singapore Pte. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Helka GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Chapter 6 - Freight Forwarder Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23Criminal / Administrative Case Examples

DSV Samson Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23OSPECA Logistics Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23Immediate Customs Service, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Federal Express. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Chapter 7 - "Catch-All" Controls Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Criminal / Administrative Case Examples

IBM East Europe/Asia Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Optical Associates, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26Berkeley Nucleonics Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26RLC Electronics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26General Monitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Chapter 8 - Denial of Export PrivilegesIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29Criminal / Administrative Case Examples

InfoCom Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29Expeditors International of Washington, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30Yaudat Mustafa Talyi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30Andrew Pietkiewicz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30


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Chapter 9 - False Statement / Misrepresentation of Fact Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31Criminal / Administrative Case Examples

Azure Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31Emcore Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31Kennametal Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32Zooma Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32Maria Elena Ibanez. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32E & M Computing Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Chapter 10 - Antiboycott Violations Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35Criminal / Administrative Case Examples

Johns Hopkins Health System Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Alison Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36St. Jude Medical Export GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Input/Output Exploration Products, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Jagro Customs Brokers & Intern. Freight Forwarders, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37Rockwell Automation, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37Serfilco, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37McMaster-Carr Supply Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Chapter 11 - Successor Liability Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39Criminal / Administrative Case Examples

Sigma-Aldrich Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39Saint-Gobain Performance Plastics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39Symmetricom, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40


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April 2005

Dear Exporting Community,

The purpose of this letter and accompanying booklet is to help you and your company better understandU.S. export control laws. U.S. export control laws help protect our country and our allies by keepinggoods and technologies out of the hands of countries of concern and terrorists who would misuse them

to attack us or our allies. This booklet is intended to deter violations of our export control laws and promotebest export compliance practices by the exporting community.

I am a representative of the U.S. Department of Commerce's Bureau of Industry and Security, the U.S.Government agency responsible for administering most U.S. export control laws on dual-use items. Dual-useitems are items that have both a commercial application and a potential weapons of mass destruction,conventional arms, or terrorist end-use. Nearly all U.S. exporters trade in items that are subject to the exportcontrol laws that we administer. These items include not only sophisticated hardware, technologies andsoftware, but also more common items such as chemical weapons precursors that are used in ball point pens.It is vital that you understand U.S. export laws before proceeding with export transactions, to ensure yourexports do not adversely affect our national security or foreign policy interests.

Most of our dual-use export control system is set forth in the Export Administration Regulations (EAR). TheEAR impose responsibilities on all of the parties to export transactions, including exporters, freight forwarders,carriers and consignees. The U.S. Government prosecutes willful violators of U.S. export control lawscriminally, and can impose substantial fines and prison terms on those persons who violate those laws. Also,violations of the EAR can be enforced administratively even if no criminal charges are brought, and can resultin fines and denial of export privileges. These penalties can have significant adverse consequences to yourbusiness, so it is vital that you familiarize yourself with U.S. law and regulations to avoid the real-life situationsthat are presented in this booklet.

In this booklet, you will be introduced to various parts of the EAR by reference to actual closed enforcementcases that are a matter of public record. Each chapter of this booklet covers a particular area of the EAR,followed by examples of relevant actual criminal and administrative cases that resulted in fines, imprisonment,and/or denial of export privileges. We hope that you will use this booklet as a guide. Please remember, it is upto you to ensure that you are in compliance with the law. Don't let an export violation ruin you!

Sincerely,

Wendy L. WysongActing Assistant Secretary for Export Enforcement


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Introduction to U.S. Export Controls

Export Enforcement Introduction and Mission

The Bureau of Industry and Security (BIS) is a part of the U.S. Department of Commerce. The ExportEnforcement arm of BIS protects U.S. national security, foreign policy, and economic interests byeducating parties to export transactions on how to improve export compliance practices, interdicting

illegal exports, investigating violations, and prosecuting violators of export control laws. At the same time,Export Enforcement works to avoid impeding legitimate trade. Export Enforcement has federal lawenforcement authority and its special agents work with BIS licensing officials and policy staff to deter the exportof items which, in the hands of unreliable users, can prove damaging to U.S. national security and foreignpolicy interests. Export Enforcement personnel work closely with Department of Commerce lawyers in theOffice of Chief Counsel for Industry and Security and Department of Justice lawyers in U.S. Attorneys' officesto bring enforcement actions against violators of U.S. export control laws.

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WHERE ARE WE LOCATED?

In addition to our Headquarters at the Department of Commerce in Washington, D.C., Export Enforcementhas nine satellite offices that have areas of responsibilities covering the entire United States.

Field Offices are located in: New York, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, San Jose,and Washington, D.C.

www.bis.doc.gov

The Office of Export Enforcement also has Export Control Attaches located in 5 overseas locations.Export Control Attaches are Office of Export Enforcement personnel on detail to the ForeignCommercial Service and report directly to the Embassies to which they are posted, with direction andoversight by the Office of Export Enforcement’s Operations Division.

Attaches are located in: Beijing, China; Hong Kong, China; New Delhi, India; Moscow, Russia; Dubai,United Arab Emirates.

Export Control Law

A number of executive branch agencies have responsibilities for regulating exports from the United States. TheDepartment of Commerce is responsible for controlling the widest range of goods and technology, all of whichare capable of being used for commercial purposes but which also present foreign policy or national securityconcerns. BIS implements export controls for the Department of Commerce through the ExportAdministration Regulations (EAR). Other federal agencies with a role in export control include the StateDepartment, which controls arms exports, the Department of Energy, which controls exports and re-exports oftechnology related to the production of special nuclear materials and the Department of Treasury, whichadministers certain embargoes.

Responsible Parties

The EAR place legal responsibility on persons who have information, authority or functions relevant tocarrying out transactions subject to the EAR. This includes exporters, freight forwarders, carriers, consigneesand any other relevant party. The EAR apply not only to parties in the United States, but also to persons inforeign countries who are involved in transactions subject to the EAR.

Consequences for Violating the EAR

Violations of the EAR are subject to both criminal and administrative penalties. In some cases, where there hasbeen a willful violation of the EAR, violators may be subject to both criminal fines and administrative penalties.However, for most administrative violations, there is no intent requirement, which means that administrativecases can be brought in a much wider variety of circumstances than criminal cases. Fines for export violationscan reach up to $1 million per violation in criminal cases, $11,000 per violation in most administrative cases,and $120,000 per violation in certain administrative cases involving national security issues.1 In addition,criminal violators may be sentenced to prison time and administrative penalties may include the denial ofexport privileges. A denial of export privileges basically prohibits a person from participating in any way in anytransaction subject to the EAR. Furthermore, it is a violation of the EAR for anyone to participate in an exporttransaction subject to the EAR with a denied person.

It should be noted that in most cases, BIS reaches negotiated settlements in its administrative cases prior to aformal administrative hearing. Those negotiated settlements are often reached as a result of voluntary self-disclosures (VSDs) of violations by companies and individuals. BIS considers VSDs to be a significantmitigating factor when negotiating settlements of administrative cases. VSDs reflect a company's orindividual's acknowledgment of guilt and acceptance of responsibility for EAR violations. To encourage VSDs,in appropriate cases, fines and other administrative penalties may be significantly reduced as a result of the factthat BIS became aware of the violations as a result of a VSD. Guidance regarding administrative penalties is


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1 These violations are based on the Export Administration Act of 1979 (50 U.S.C. app. §§ 2401- 2420 (2000)), as amended, and infla-tion adjustments made in 15 C.F.R. § 6.4 (2004). From August 21, 1994 through November 12, 2000, the Act was in lapse. Duringthat period, the President, through Executive Order 12924, which had been extended by successive Presidential Notices, the last ofwhich was August 3, 2000 (3 C.F.R., 2000 Comp. 397 (2001)), continued the Regulations in effect under the International EmergencyEconomic Powers Act (50 U.S.C. §§ 1701 - 1706 (2000)) ("IEEPA"). On November 13, 2000, the Act was reauthorized by Pub. L.No. 106-508 (114 Stat. 2360 (2000)) and it remained in effect through August 20, 2001. Executive Order 13222 of August 17, 2001(3 C.F.R., 2001 Comp. 783 (2002)), which has been extended by successive Presidential Notices, the most recent being that of August6, 2004 (69 Fed. Reg. 48763, August 10, 2004), continues the Regulations in effect under IEEPA.

provided in Supplement No. 1 of Part 766 of the EAR and in chapter five of this publication. In that guidance,some factors, including VSDs, are given "great weight" and are viewed as significantly mitigating violations. Inthe following cases, VSD credit is noted where it was given.

As a standard provision of BIS settlement agreements, the respondent involved neither admits nor denies thecharges made against it. Therefore, the violations referenced in many of the summaries in this booklet haveneither been proven in court nor been admitted to by the company or individual. Please also be aware that thisletter and booklet are not intended to create, nor do they create, any right or benefit, procedural or substantive,enforceable by law against the Department of Commerce or any other part of the U.S. Government. Norshould the cases in this booklet be interpreted as precedent in any future actions involving theU.S. Government.


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Chapter 1 - Export License Requirements

Introduction

Many exports of items, including software and technology, require a license from BIS. It is theresponsibility of the exporter to apply for a license when one is required under the EAR. Licenserequirements for a particular transaction, as described in the EAR, are based on a number of factors,

including technical characteristics of the item to be exported and the item's destination, end-user, and end-use.When determining whether a license is required for your transaction, you should be able to answer thefollowing questions:

What is being exported?

Where is the item being exported?

Who will receive the item?

How will the item be used?

If you need assistance to determine whether the item you want to export requires a license you should:

1. Check the BIS Website http://www.bis.doc.gov, or

2. Call one of our export counselors at 202-482-4811 (Washington, DC) or 949-660-0144 (California)for counseling assistance.

Please note that, whether you are the exporter, freight forwarder, consignee, or other party to the transaction,you must address any red flags that arise because taking part in an export transaction where a license is requiredbut not obtained may subject you to criminal or administrative liability. The EAR discuss red flags in a sectionentitled "Know Your Customer," Supplement No. Three to Part 732, which is available on the BIS website.

Criminal / Administrative Case Examples

Dr. Thomas Butler

The Violation: On January 14, 2003, Dr. Thomas Campbell Butler, M.D., a professor at Texas TechUniversity in Lubbock, Texas reported to the FBI that thirty vials of a potentially deadly plague bacteria,Yersinia pestis (the causative agent of human plague), were missing and presumed stolen from his research lab.The report sparked a bio-terrorism alert in west Texas and President Bush was informed of the incident.However, investigation proved that Dr. Butler had illegally exported the Yersinia pestis which is a controlled

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PREVENTATIVE MEASURESYOU CAN TAKE

� Check exporters and customers� Check end users and end-uses � Review Shipper's Export Declarations

item under the EAR and cannot be exported without the required exportlicenses from BIS. On January 15, 2003, Dr. Butler was arrested.

Among the numerous charges of which Dr. Butler was found guilty attrial, two were export control related: making false, fraudulent andfictitious statements regarding the exports to federal agents and making anunauthorized export to Tanzania.

The Penalty: Dr. Butler was convicted of forty-seven counts of a sixty-ninecount indictment that stemmed from BIS's investigation. He was sentencedto two years in prison on March 10, 2004, and fired from Texas Tech.

Omega Engineering Inc.

The Violation: Omega Engineering Inc., of Stamford, Connecticut and its former Vice President, RalphMichel, violated the EAR by exporting certain laboratory equipment to Pakistan in 1997 after BIS had denieda license for the same shipment earlier that year.

The Penalty: In the criminal cases, Michel was sentenced to ten months imprisonment and fined $50,000,and Omega was sentenced to a $313,000 criminal penalty and five years corporate probation. In theadministrative cases, Omega agreed to pay a $187,000 penalty and to a five-year denial of export privileges toPakistan. BIS also denied Michel's export privileges to Pakistan for five years.

Worldwide Sports & Recreation, Inc. / Bushnell Corporation

The Violation: Between September 1995 and December 1997, Worldwide Sports & Recreation, Inc., whichdoes business as Bushnell Corporation, exported Night Ranger night vision devices to Japan and fourteen other

countries, without the required BIS export licenses. Bushnell sold thecameras to a Japanese company but transferred the cameras to a U.S.company in Florida knowing that the cameras were going to be exportedto Japan. The foreign company and the domestic intermediary pleadedguilty and cooperated.

The Penalty: In the criminal case, Bushnell was sentenced to a $650,000criminal fine and five years probation. In the related administrative case,Bushnell agreed to pay an administrative penalty of $223,000 and to aone-year suspended denial of export privileges.

Honeywell International Inc.

The Violation: Between December 2001 and February 2002, Honeywell exported hydrogen fluoride toMexico from Louisiana without the required export licenses from BIS.

The Penalty: Honeywell agreed to pay a $36,000 administrative penalty.

Mitigating Circumstance: Honeywell voluntarily self-disclosed the violations and cooperated fully withthe investigation.


8

Dr. Thomas C. Butler

Night Ranger - Night Vision

Xinjian Yi and Yu Yi

The Violation: Between June 1998 and July 1999, Xinjian Yi and Yu Yiviolated the EAR when they conspired to export thermal imaging camerasfrom the United States to the People's Republic of China (PRC) withoutthe required export licenses from BIS. Xinjian Yi also violated the EARwhen he carried the unlicensed cameras with him to the PRC,constituting an export, and Yu Yi aided and abetted the export of thethermal imaging cameras by acquiring them for Xinjian Yi in the UnitedStates.

The Penalty: The parties were each ordered to pay a $22,000administrative penalty, and denied export privileges for ten years.

Silicon Graphics, Inc. (SGI)

The Violation: In 1996, SGI knowingly exported Challenge L computer systems, upgrades, and peripheralequipment to the All-Russian Institute for Technical Physics (Chelyabinsk-70) without the required exportlicense from BIS. Additionally, SGI re-exported computers from its facility in Switzerland to the UnitedArab Emirates without the required licenses and failed to notify BIS of certain computer exports as requiredby the EAR.

The Penalty: In the criminal case, SGI pled guilty to two felony charges and was sentenced to $1 million incriminal fines. In the related administrative case, SGI agreed to pay a $182,000 administrative penalty. SGI'sexporting privileges to Russia were denied for a period of three years. The denial of export privileges wassuspended. SGI also agreed, for a period of three years, not to exercise its eligibility to use License ExceptionCTP for exports and re-exports to Russia, or to engage in any activity such as the repair or maintenance ofcomputers involving any military or nuclear end-user or end-use in Russia without the prior written consentof BIS. Finally, SGI agreed to report to BIS, within 45 days, all of its exports to certain countries of concernduring the prior six months.

Midway Arms Inc.

The Violation: Between April 1999 and July 2001, Midway Arms, Inc. exported firearm scopes and mountsto Canada without the required export licenses. Midway also exported firearm scopes and mounts toArgentina, Barbados, Bolivia, Brazil, Finland, Mexico, the Philippines, South Africa, Sweden, Switzerland, andUruguay without the required export licenses between May 1999 and September 2002.

The Penalty: Midway agreed to pay a $222,000 administrative penalty, of which $88,800 was suspended fora period of one year and thereafter waived.

Morton International, Inc.

The Violation: Between 1999 and 2001 Morton International, Inc. exported and attempted to exportthiodiglycol to Mexico and organo-inorganic compounds to Singapore and Taiwan without the required exportlicenses from BIS. Between 1997 and 2000, Morton International, Inc. affiliates Morton International, S.A.S.and Rohm and Haas Japan re-exported organo-inorganic compounds to Israel, Poland, Tunisia, Taiwan andIndia without the required export licenses from BIS.


9

Thermal Imaging Camera

The Penalty: Morton and its affiliates agreed to pay a $647,500 administrative penalty.

Mitigating Circumstance: Morton International, Inc. voluntarily disclosed the violations relating to theshipments of organo-inorganic compounds to BIS and cooperated with the investigation.

Roper Scientific, Inc.

The Violation: Between March 13, 2000 and August 24, 2000, Roper Scientific, Inc. knowingly exportedcertain night vision cameras without the required export licenses from BIS. These cameras were exported tovarious destinations, including South Korea, Japan, and Italy. Roper also failed to retain certain export controldocuments and made false statements on a Shipper's Export Declaration.

The Penalty: Roper agreed to pay a $422,000 administrative penalty.

Mitigating Circumstance: Roper voluntarily self-disclosed the violations and cooperated fully with theinvestigation.

Molecular Probes, Inc.

The Violation: Between January 1998 and October 2002, Molecular Probes, Inc. exported conotoxin andtetrodotoxin without the required export licenses from BIS. Molecular Probes has since been acquired byInvitrogen Corporation, which agreed to guarantee payment of the administrative penalty.

The Penalty: Molecular agreed to pay a $266,750 administrative penalty.

Mitigating Circumstance: Molecular Probes voluntarily self-disclosed the violations and fully cooperated withthe investigation.

Reliance Steel & Aluminum Company

The Violation: Between February 1999 and May 2002, Reliance Steel & Aluminum Company, actingthrough its Bralco Metals division, exported aluminum alloy rods without the required export licenses to thePeople's Republic of China, Taiwan, Malaysia, and Singapore. Bralco also submitted false Shipper's ExportDeclarations.

The Penalty: Reliance agreed to pay a $95,850 administrative penalty.

W.R. Grace

The Violation: In 1997, W.R. Grace exported the chemical triethanolamine to end-users in Brazil, theDominican Republic, Hong Kong, Mexico, the Philippines, Singapore, Thailand, and Venezuela without therequired BIS export licenses.

The Penalty: W.R. Grace agreed to pay a $178,500 administrative penalty.

Mitigating Circumstance: W.R. Grace voluntarily disclosed the violations and cooperated fully in the investigation.


10

Hamilton Sundstrand Corporation

The Violation: Between September 1997 and February 2001, Sundstrand exported or re-exported centrifugalpumps to various end-users in China, Taiwan, Israel, and Saudi Arabia, without the required export licenses.Sundstrand also made false statements on Shipper's Export Declarations, stating that no export license wasrequired, when in fact a license was required. Additionally, Sundstrand failed to file Shipper's ExportDeclarations as required, and failed to provide certain required information on those Shipper's ExportDeclarations that Sundstrand did file.

The Penalty: Hamilton agreed to pay a $171,500 administrative penalty.

Mitigating Circumstance: Sundstrand voluntarily disclosed these violations and cooperated fully inthe investigation.

Flint Hill Resources L.P.

The Violation: Between July 1997 and March 1999, Koch Petroleum violated the EAR by exporting crudepetroleum to Canada without the required export licenses from BIS and failing to file Shipper's ExportDeclarations.

The Penalty: Flint Hill, formerly known as Koch Petroleum Group, L.P., agreed to pay a $200,000administrative penalty.

Mitigating Circumstance: Koch Petroleum voluntarily self-disclosed the violations, and fully cooperated withthe investigation.

Compaq

The Violation: Between 1994 and 2000, Digital Equipment Corporation and its subsidiaries violated the EARby exporting or re-exporting computers and computer equipment without the required export licenses fromBIS. Exports of these commodities were destined for South Korea. Re-exports of the U.S.-origin goods weremade from Hong Kong to the PRC and from Singapore to India. Digital Equipment Corporation has nowmerged with Compaq

The Penalty: Compaq agreed to pay a $39,000 administrative penalty.

Mitigating Circumstances: Compaq voluntarily self-disclosed the violations and cooperated fully inthe investigation.


11

LISTS TO CHECK� List of Persons Denied Export Privileges� Unverified List� Entity List� Specially Designated Nationals and Terrorist Lists� Debarred List

Chapter 2 - License Conditions

Introduction

To minimize the potential diversion or misuse of licensed exports, BIS adds conditions to nearly allexport licenses. License conditions may, among other things, restrict the way an item is used afterexport, or it may require certain reports to be made by the exporter. The conditions are created through

an interagency process that includes BIS and agencies at the Departments of State and Defense, among others.The use of license conditions allows the Government to approve license applications that might otherwise bedenied. Once a license is issued, BIS seeks to ensure compliance with the conditions.


Global Dynamics Corporation

The Violation: Between May 2001 and January 2002, Global Dynamics Corporation exported and attemptedto export military truck parts to South Korea in violation of the terms of a BIS license. Most of these exportswere in excess of the dollar limit on an export license previously issued to Global.

The Penalty: Global agreed to pay a $38,000 administrative penalty. A portion of the administrative penalty,$8,000, was suspended for one year.

Sun Microsystems, Inc.

The Violation: Sun Microsystems of Santa Clara, California failed tocomply with the terms and conditions of BIS licenses that were granted toSun for the export of high performance computers by not filing copies ofcertain documents with BIS after the exports occurred. Additionally, Sunexported computers to military end-users in the PRC and Egypt withoutthe required BIS licenses and altered a document responsive to asubpoena, among other violations.

The Penalty: Sun Microsystems agreed to pay a $269,000 administrativepenalty and to a one year denial of its export privileges. The denial ofexport privileges was suspended.

Note: BIS also settled cases with two of Sun's subsidiaries for aiding andabetting the unlicensed export to the military end-user in China.


13

Chapter 3 - Deemed Exports

Introduction

Most people think of an export as the shipment of a commodity from inside the United States to aforeign country, but this is only one type of export. Under the EAR, the release of technology orsource code to a foreign national, even if the foreign national is in the United States, is also

"deemed" to be an export to the home country or countries of the foreign national and may require a licenseunder the EAR. Technology can be released through visual inspection, oral exchanges of information, or theapplication to situations abroad of personal knowledge or technical experience acquired in the United States.For example, the review of controlled technology by a graduate student, who is an alien with a valid visa,pursuant to a grant from a private company which will not release the study publicly, may require an exportlicense or license exception since such review could be considered to be a "deemed export".


Suntek Microwave, Inc. and Charlie Kuan

The Violations: Between 1996 and 2000, Suntek Microwave, Inc. and its President Charlie Kuan failed toobtain export licenses from BIS required for transferring controlled technology to Chinese nationals whoworked at Suntek and were trained in detector log video amplifiers (DLVA) manufacturing technology. At thedirection of Mr. Kuan, Suntek trained Chinese nationals to manufacture controlled DLVAs for the expresspurpose of transferring the manufacturing technology to Chengdu Jeway Microwave Telecommunications Co.,Ltd., Suntek's primary shareholder and a company known to have been controlled by the PRC government.

Further, Suntek, under the direction of Kuan, failed to obtain the required export licenses for shipments ofDLVA to the PRC and knowingly made false statements to BIS on a license application by supplying false end-user information in order to obtain export authorization to ship DLVAs to the PRC. Further, Kuan falselycertified the truth of these statements.

The Penalty: Suntek was sentenced to a $339,000 criminal fine and, in the related administrative case, agreedto pay a $275,000 administrative penalty and to a twenty year denial of export privileges. Suntek'sadministrative penalty was waived. Kuan also agreed to pay a $187,000 administrative penalty and to a twentyyear denial of export privileges.


15

Fujitsu Network Communications, Inc.

The Violation: Between 1996 and 2000, Fujitsu Network Communications, Inc. engaged in conductprohibited by the EAR by employing foreign nationals from the PRC and Ukraine to conduct research on thedevelopment and manufacturing of commercial digital fiber-optic transmission and broadband switchingequipment, software and technology without the required BIS licenses.

The Penalty: Fujitsu agreed to pay a $125,000 administrative penalty.

Mitigating Circumstance: Fujitsu voluntarily self-disclosed the violations and cooperated fully withthe investigation.

Pratt & Whitney

The Violations: Between August 1998 and September 1999, Pratt & Whitney failed to obtain the requiredBIS export licenses for the release of controlled technology relating to material coating and gas turbine enginecomponents to foreign nationals from various countries, including Germany, the Netherlands, and Spain. Prattalso failed to obtain the required licenses for exports it made to China, Japan, and Singapore.

The Penalty: Pratt & Whitney agreed to pay a $150,000 administrative penalty.

Mitigating Circumstance: Pratt & Whitney voluntarily self-disclosed the violations and cooperated fully withthe investigation.

New Focus, Inc.

The Violations: From 2000 to 2002, New Focus failed to obtain the export licenses required for transferringtechnology to two Iranian nationals and one Chinese national who, in the course of their employment in theUnited States, were exposed to manufacturing technology controlled by the EAR. Also, between 1997 and2001, New Focus failed to obtain the required export licenses for shipments of amplifiers to the CzechRepublic, Singapore, and Chile.

The Penalty: New Focus agreed to pay a $200,000 administrative penalty.

Mitigating Circumstance: New Focus voluntarily self-disclosed the violations and fully cooperated withthe investigation.

Lattice Semiconductor Corporation

The Violations: Between July 2000 and January 2002, Lattice Semiconductor Corporation released technicaldata to Chinese nationals who were brought to the United States from the PRC for technical training in theUnited States, without obtaining the required BIS licenses. Also, between April 2000 and July 2001, Latticeexported extended temperature range programmable logic devices to the PRC without the required exportlicenses and exported the related technical data to the PRC without the required export licenses.

The Penalty: Lattice agreed to pay a $560,000 administrative penalty.

Mitigating Circumstance: Lattice voluntarily self-disclosed the violations and fully cooperated withthe investigation.


16

Chapter 4 - State Sponsors of Terrorism

Introduction

The United States maintains comprehensive export controls against countries that have been declared bythe Secretary of State to be state sponsors of terrorism. Many exports to these countries, even ofordinary commercial items such as sunglasses or perfume that are not typically controlled to other

countries, may require authorization from the U.S. Government. BIS or the Department of the Treasury'sOffice of Foreign Assets Control (OFAC), or in some cases both agencies together, work to enforce thesecontrols. Trade with these destinations should be undertaken with extra caution.

Regional Considerations:

It is important to familiarize yourself with the restrictions that applyto the ultimate destination of your export. U.S. law in this areafrequently changes in accordance with an evolving foreign policy.The following websites are good resources:

OFAC's website:

http://www.treas.gov/offices/enforcement/ofac/

BIS's website:

http://www.bis.doc.gov/


OTS Refining Equipment Corporation

The Violation: Between March 1997 and March 1999, OTSRefining Equipment of Markham, Ontario, Canada, and itspresident, Abdulamir Mahdi, bought U.S. oil-field and industrialequipment from the United States and had it exported to Iranthrough Canada. The exports to Iran in which Mahdi and OTSparticipated were not authorized by OFAC, which administersthe embargo against Iran. As a result, these exports also violatedthe EAR.


17

What is OFAC and whatdoes it do?

The Office of Foreign AssetsControl administers andenforces economic sanctionsprograms against countriesand groups of individuals,such as terrorists andnarcotics traffickers. Thesanctions can be eithercomprehensive or selective,using the blocking of assetsand trade restrictions toaccomplish foreign policyand national security goals.

The Penalty: In the criminal case, Mahdi pled guilty to conspiring to violate U.S. export control laws and wassentenced to fifty-one months in prison. In the related administrative cases, Madhi and OTS received twenty-year denials of export privileges.

3-G Mermet Corporation

The Violation: On January 13, 2003, 3-G Mermet Corporation attempted to ship interior window shadefabric through its parent company, Mermet S.A. of France, to Iran without prior authorization from OFAC asrequired by the EAR. 3-G Mermet sold the interior window shade fabric with knowledge that its ultimatedestination was Iran and that the required U.S. government authorization would not be obtained.

The Penalty: 3-G Mermet agreed to pay a $17,500 administrative penalty and implement an exportmanagement system.

Dosmatic U.S.A., Inc.

The Violations: Between May and August of 2001, Dosmatic U.S.A, Inc. and its former Chief FinancialOfficer, Reza Pirasteh, violated U.S. export controls laws by illegally shipping liquid injectors to Iran viaBelgium.

The Penalty: In the criminal case, Dosmatic pled guilty to violating U.S. export control laws and was orderedto pay a fine of $50,000 and placed on probation for three years. Pirasteh also pled guilty and was sentencedto a fine of $2,000 and probation for three years for making a false statement tofederal investigators about Dosmatic's export activities. In the relatedadministrative cases, Dosmatic agreed to pay a $44,000 administrative penaltyand to a thirty month denial of its export privileges. The denial of exportprivileges was suspended. Pirasteh agreed to a $4,500 administrative penalty andto a seven-year denial of his export privileges.

Bio Check, Inc.

The Violation: Between 1998 and 2000, Bio Check exported medicaldiagnostic kits to Iran through freight forwarders in the United Arab Emiratesand Italy, without approval from OFAC, and without filing the requiredShipper's Export Declarations.

The Penalty: Bio Check agreed to pay an administrative penalty of $22,500. OFAC imposed a $32,000 finefor related OFAC violations.

Mitigating Circumstance: Bio Check voluntarily disclosed these violations to both BIS and OFAC andcooperated fully in the investigation.


18

State Sponsorsof Terrorism:

� Cuba� Iran � Libya� North Korea� Sudan� Syria

E.H. Wachs

The Violation: Between March 1996 and February1997, E.H. Wachs conspired to export pipe cuttingmachines and spare parts to the National Iranian GasCompany without the required authorization. Wachs splitorders for more than fifty pipe-cutting machines andspare parts into small shipments and then exported theitems through Canada to conceal the fact that they weredestined for Iran.

The Penalty: In the criminal case, Wachs was sentenced to a criminal fine of $506,000 and 24 months ofprobation. In the administrative case, Wachs agreed to pay an administrative penalty of $159,000 and wasordered to institute an export compliance program. Wachs also paid another administrative penalty of $85,000to OFAC for the violations of Treasury regulations that stemmed from the unauthorized exports.

Oerlikon

The Violation: Between June 1999 and March 2000, Oerlikon Schweisstechnik AG and Reweld AGconspired to purchase 30,000 pounds of Solka-Flok 200 cellulose, valued at $21,000, for resale andtransshipment to Iran. Oerlikon solicited Reweld to export the cellulose to Switzerland, where Oerlikonintended to take possession of the materials and reexport them to Iran.

The Penalty: Oerlikon agreed to pay a $33,000 administrative penalty. Reweld agreed to pay a $22,000administrative penalty. In addition, Oerlikon agreed to a one year denial of export privileges. The denial ofexport privileges was suspended.

Industrial Scientific Corporation

The Violation: Industrial Scientific Corporation (ISC) violated the EAR by shipping two gas monitors fromthe United States to the United Arab Emirates in June 1998 without obtaining the proper authorization fromthe U.S. Government. In addition, ISC further violated the EAR by transferring the gas monitors to the UAEwith knowledge that the monitors would be re-exported from the UAE to Iran.

The Penalty: ISC agreed to pay a $30,000 administrative penalty.


19

South Pars Project: A Natural Gas Field Project in Iran.

Chapter 5 - Transshipment and Re-exports

Introduction

Parties to an export transaction cannot bypass the EAR by shipping items through a third country. Thetransshipment, re-export, or diversion of goods and technologies in international commerce may be aviolation of U.S. law. For example, an exporter cannot bypass the U.S. embargo against Iran by shipping

an item to a distributor in the United Kingdom and asking that distributor to transship the item to a customerin Iran. Under U.S. law, this would be considered an export to Iran, even though it does not go directly to thatcountry, and both the U.S. exporter and the United Kingdom distributor could face liability.


Ebara International Corporation

The Violation: Ebara International Corporation (EIC) and Everett Hylton, EIC's founder and former ChiefExecutive Officer, violated the EAR by conspiring with others to export cryogenic in-tank submersible pumpsto Iran without the required export licenses and evading the requirements of the EAR by participating inactions to conceal the illegal exports. Specifically, EIC, Hylton and their co-conspirators devised and employeda scheme under which EIC sold the pumps to a co-conspirator in France, who then forwarded the pumps toIran. In order to conceal the illegal exports, EIC and Hylton participated in the falsification of documentsshowing the pumps were destined for Iran, the creation of documents stating the ultimate destination wasFrance, and the failure to mark parts for the pump with EIC identification stamps.

The Penalty: In the criminal case, Ebara pled guilty to conspiring to violate U.S. export control laws and wassentenced to a $6.3 million criminal fine and three years probation. In the related administrative case, Ebaraagreed to pay a $121,000 administrative penalty and to a three year denial of export privileges. The denial ofexport privileges was suspended. As to Hylton, in the criminal case, he was sentenced to a $10,000 criminalfine and three years probation. In the related administrative case, Hylton agreed to pay a $99,000administrative penalty.

Lam Research Singapore Pte. Ltd.

The Violation: During November and December of 2000, Lam Research Singapore Pte. Ltd. (LRS) knowinglyre-exported U.S.-origin pressure transducers from Singapore to Malaysia without the required BIS licenses.

The Penalty: LRS agreed to pay a $40,000 administrative penalty.

Mitigating Circumstance: LRS voluntarily self-disclosed the violations and cooperated fully inthe investigation.


21

Helka GmbH

The Violation: In August 1997, Helka purchased a PhotoScan TD photo digitizing system from a U.S.manufacturer, listing an end user located in the United Arab Emirates. Helka later shipped the PhotoScan TDdigitizing system and accompanying software to Iran without the required export licenses. Helka alsoforwarded the PhotoScan TD system to Iran with knowledge that a violation of the EAR was about to occurand solicited the servicing of the goods in Iran in violation of the EAR.

The Penalty: Helka agreed to pay a $15,000 administrative penalty.


22

INCREASING TRANSPARENCYTHROUGH PENALTY GUIDANCE

BIS has issued guidance (found in Supplement No. 1 to Part 766 of the EAR) to provide thepublic with a comprehensive description of how BIS determines appropriate penalties in thesettlement of administrative enforcement cases. It explains that BIS carefully considers eachsettlement offer in light of the facts and circumstances of the case, relevant precedent, and BIS'sobjective to achieve an appropriate level of penalty and deterrent effect.

The penalty guidance is available online at: http://www.access.gpo.gov/bis/ear/pdf/766.pdf

Several factors are taken into account when determining the appropriate administrative penalty.The penalty guidance encourages parties to provide information to BIS that would be helpful inthe application of the guidance to their cases and discourages parties from proceeding in a mannerthat BIS would consider harmful to the resolution of their cases or that may cause interference.

Some factors are given "great weight" and are treated as considerably more significant thanfactors that are not so designated.

� General factors for consideration include:� Destination of the export � Degree of willfulness involved in violations � Number of violations� Criminal charges

� Mitigating factors include: � Voluntary self-disclosure of violations ("great weight")� Effective export compliance program ("great weight")� Cooperation with BIS investigation� Assistance to other BIS investigations� No previous record of violations

� Aggravating factors include: � Deliberate effort to hide or conceal violations ("great weight")� Serious disregard for export compliance responsibilities ("great weight")� Item is significant due to its sensitivity or reason for control ("great weight")� History of violations� High quantity or value of exports

Chapter 6 - Freight Forwarder

Introduction

Primary responsibility for compliance with the EAR generally falls on the "principal parties in interest" ina transaction, who are usually the U.S. seller and the foreign buyer. However, freight forwarders or otheragents acting on behalf of the principal parties are responsible for their actions, including the

representations they make by signing an export declaration or other export control document.

To help avoid liability in an export transaction, agents and exporters must decide whether any aspect of thetransaction raises red flags, inquire about those red flags, and ensure that suspicious circumstances are notignored. Both the agent and the principal party are responsible for the correctness of each entry made on anexport document. Good faith reliance on information provided by the exporter may excuse an agent's actionsin some cases, but the careless use of pre-printed "No License Required" forms or unsupported entries can getan agent into trouble.


DSV Samson Transport

The Violation: DSV Samson Transport, a freight-forwarding companybased in New Jersey, pled guilty to forwarding shipments to India between1999 and 2001 despite being warned by Special Agents from the BISOffice of Export Enforcement on at least three occasions that suchshipments would be in violation of BIS export controls designed toprevent nuclear proliferation.

The Penalty: In the criminal case, DSV Samson Transport was sentencedto a $250,000 criminal fine and five years of probation. In the relatedadministrative case, DSV Samson agreed to pay an administrative penalty of $399,000.

OSPECA Logistics Inc.

The Violation: Between December 2001 and February 2002, freight forwarder OSPECA Logistics ofBrownsville, Texas, exported shipments of hydrogen fluoride to Mexico on behalf of a customer, without therequired export licenses from BIS. In addition to the unlicensed export violations, OSPECA filed falseShipper's Export Declarations in conjunction with the shipments.

The Penalty: OSPECA agreed to pay a $60,000 administrative penalty, of which $15,000 was suspended.


23

Immediate Customs Service, Inc.

The Violation: Between September 1995 and December 1996, Immediate Customs Service, an internationalfreight forwarder and customs broker, participated in the export of U.S. origin perfume to Cosmotrans inSwitzerland, a company that was denied all U.S. export privileges for twenty years in 1988

The Penalty: Immediate Customs Service agreed to pay a $30,000 administrative penalty of which $20,000was suspended.

Federal Express

The Violation: In 1999, Federal Express committed one violation of a denial order and one violation of therecordkeeping provisions of the EAR when it transported U.S.-origin equipment to the Realtek SemiconductorCo. Ltd., of Taipei, Taiwan, in violation of Realtek's denial order.

The Penalty: Federal Express Corporation agreed to pay a $15,000 administrative penalty.


24

Chapter 7 - "Catch-All" Controls

Introduction

As mentioned in Chapter One, BIS controls exports of items not only based on their technicalspecifications, but also based on their intended end-use and end-user. The EAR impose licenserequirements on exports of items subject to the EAR if the exporter knows or has reason to know that

any of the items will be used in an end-use of particular concern to the U.S. Government, such as a missile ornuclear weapons program. These controls are often referred to as "catch-all" controls because they apply toany item subject to the EAR, even if the item would not ordinarily require a license based on itstechnical specifications.

The U.S. Government has officially notified the public, through the Entity List published in Supplement Fourto Part 744 of the EAR, that exports to certain end-users present an unacceptable risk of being diverted to anend-use of concern and require a license. While this List assists businesses in determining whether an entityposes proliferation concerns, it is not comprehensive. It does not relieve parties to an export transaction of theirresponsibility to determine the nature and activities of potential customers who may not be on the Entity List(see BIS's "Know Your Customer" Guidance in Supplement No. Three to Part 732 of the EAR, available onthe BIS website).

The Entity List is published in the Federal Register. The Federal Register is the official source of informationabout organizations on BIS's Entity List. The Federal Register from 1995 to the present is available on theGovernment Printing Office Access Web site. The current Entity List can also be found on the BIS website athttp://www.bis.doc.gov/.


IBM East Europe/Asia Ltd.

The Violation: Between 1996 and 1997, IBM East Europe/Asia Ltd., a Russian subsidiary of InternationalBusiness Machines Corporation, exported computers to a Russian nuclear weapons laboratory, Arzamas-16,having reason to know that the computers would be used "directly or indirectly" in research on, ordevelopment, design, manufacture, construction, testing or maintenance of nuclear explosive devices andwithout the required BIS license.

The Penalty: In the criminal case, IBM pled guilty to an export violation and was sentenced to a $8.5 millioncriminal fine. In the related administrative case, IBM agreed to pay a $171,000 administrative penalty and toa two year denial of export privileges. The denial of export privileges was suspended.


25

Optical Associates, Inc.

The Violation: On or about December 2, 1998, Optical Associates exported a U.S.-origin Mask Aligner andparts from the U.S. to Bhaba Atomic Research Center (BARC), in India, an entity on the BIS Entity List,without obtaining the required BIS license.

The Penalty: In the criminal case, Optical Associates was sentenced to a criminal fine of $100,000 and twoyears probation. In the related administrative case, Optical Associates agreed to a three year denial of exportprivileges to India.

Berkeley Nucleonics Corporation

The Violation: Between 1998 and 2000, Berkeley NucleonicsCorporation (BNC) exported and attempted to export shipments ofnuclear pulse generators to the Department of Atomic Energy (DAE) andthe Nuclear Power Corporation (NPC), in India, without the requiredlicenses. At the time of the export, DAE and NPC were both on BIS'sEntity List and exports to DAE and NPC required prior authorization.

The Penalty: In the criminal case, BNC was sentenced to a $300,000criminal fine. In the related administrative case, BNC agreed to pay a$55,000 administrative penalty and to a five-year denial of export privileges. The denial of export privilegespenalty was suspended. Further, two former employees of BNC pled guilty to misrepresenting and concealingfacts on an export document and making a false statement on an export control document. Both weresentenced to criminal fines of $1,000, two years probation and 100 hours of community service, and wereprohibited from engaging in or facilitating export transactions.

RLC Electronics, Inc.

The Violation: Between March 2002 and April 2003, RLC Electronics, Inc. exported power dividers and lowpass filters without the required BIS licenses to the Indian Space Research Organization's (ISRO) Telemetry,Tracking and Command Network (ISTRAC) in India. In January 2003, RLC exported position switcheswithout the required BIS license to the ISRO Sriharikota Space Center (SHAR) in Bangalore, India. At thetime of the export, ISTRAC and SHAR were on BIS's Entity List and exports to ISTRAC and SHAR requiredprior authorization. RLC also made false statements on a Shipper's Export Declaration submitted to the U.S.Government.

The Penalty: RLC Electronics agreed to pay a $30,000 administrative penalty.


26

Pulse Generator

General Monitors

The Violation: In December 1998, General Monitors exported gas and fire detection equipment without therequired BIS licenses to Bharat Heavy Electricals Limited (BHEL) in India. Further, between 1998 and 2001,General Monitors falsely indicated that shipments to BHEL did not require an export license on Shipper'sExport Declarations accompanying shipments to BHEL. At the time of the export, BHEL was on BIS's EntityList and exports to BHEL required prior authorization.

The Penalty: General Monitors agreed to pay a $40,000 administrative penalty.

Mitigating Circumstance: General Monitors voluntarily self-disclosed some of the violations and cooperatedfully in the investigation.


27

PARTNERSHIP BETWEEN EXPORT ENFORCEMENT AND YOU By employing best compliance practices and working together with ExportEnforcement, your company can avoid illegal transactions, thereby helping you to:

� avoid negative publicity

� avoid fines and imprisonment

� avoid costs for legal representation resulting from a criminal or administrativeproceeding.

STRENGTHENING OUR PARTNERSHIP MEANS WORKING TOGETHER TOENHANCE OUR NATIONAL SECURITY

Chapter 8 - Denial of Export Privileges

Introduction

BIS has the authority and discretion to deny all export privileges under the EAR of a particular domesticor foreign person or company. BIS may impose a denial of export privileges as a sanction in anadministrative case, or as a result of a person's criminal conviction of certain statutes (e.g. the Arms

Export Control Act), and may also impose temporary denials to prevent an imminent violation of the EAR.The standard terms of a BIS denial order are published in Supplement Two to Part 764 of the EAR.

BIS publishes the names of persons who have had their export privileges denied in the Federal Register. TheFederal Register is the official source of information about denied persons. The Federal Register from 1995 topresent is available on the Government Printing Office Access Web site. A current list of persons denied exportprivileges can also be found on the BIS website at http://www.bis.doc.gov/.


InfoCom Corporation

The Violation: During late 2001 and early 2002, Ihsan Elashyi, a corporateofficer of InfoCom Corporation, violated a Temporary Denial Order (a 180-day denial of export privileges issued to prevent an imminent violation of theEAR) on numerous occasions and was criminally convicted. On July 7,2004, InfoCom and five corporate officers, including Ihsan Elashyi and hisbrothers Bayan, Ghassan, Basman, and Hazim, were also convicted ofconspiring to export certain proscribed computer equipment to Libya andSyria (two state sponsors of terrorism) and conspiring to file false Shipper'sExport Declarations.

The Penalty: Ihsan Elashyi was sentenced to four years in federal prison forviolating the denial order. Sentencing on the export violations, theconspiracy charges, and false statement charges is pending the outcome of anadditional trial related to money laundering and financing of terrorism.


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The Arrest of Ihsan Elashyi

Expeditors International of Washington, Inc.

The Violation: In December of 1996, Expeditors International of Washington, Inc. violated the terms of aBIS order denying the export privileges of Realtek Semiconductor Co., Ltd., in Taiwan, when it forwardedcommercial air-conditioning units to Realtek. The Department settled related charges against Realtek inDecember of 2002. Realtek is no longer subject to a denial order.

The Penalty: Expeditors agreed to pay an administrative penalty of $5,000.

Yaudat Mustafa Talyi

The Violation: In November and December 2002, Yaudat Mustafa Talyi violated a BIS Temporary DenialOrder (a 180-day denial of export privileges issued to prevent an imminent violation of the EAR) placed againsthim on September 30, 2002, by participating in an attempted export of items to the United Arab Emirates,and directing another exporter to handle one of his pending exports.

The Penalty: In the criminal case, in April 2004, Talyi was sentenced to a $25,000 criminal fine, and fivemonths in prison, five months home confinement and twelve months supervised release. In the relatedadministrative case, Talyi was ordered to pay a $121,000 administrative penalty and a twenty year denial ofexport privileges was imposed.


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"A Cautionary Tale"

Andrew Pietkiewicz

The Violation: Andrew Pietkiewicz failed to pay a portion of a $25,000 administrativepenalty imposed on him by BIS (previously BXA) for the illegal export of computersand computer accessories.

The Penalty: Special Agents from BIS's Office of Export Enforcement obtained an arrestwarrant for Pietkiewicz and, on March 5, 2000, they arrested him as he entered theU.S. from Poland. Pietkiewicz was remanded to custody, and later pled guilty to afelony charge.

Chapter 9 - False Statement/Misrepresentation of Fact

Introduction

Aparty to an export transaction may be subject to criminal and/or administrative sanctions for makingfalse statements to the U.S. Government in connection with an activity subject to the EAR. Mostfrequently, the false statements are made on an export document or to a federal law enforcement officer.

Common types of false statements seen by the BIS are statements on a Shipper's Export Declaration that anexport does not require a license (i.e., that it is "NLR") when in fact a license is required for the shipment, orstatements that an export was shipped under a particular license number when in fact that license was for adifferent item. False statements that are made to the U.S. Government indirectly through another person, suchas a freight forwarder, are still violations of the EAR.


Azure Systems

The Violation: On July 16, 2004, Ting-Ih Hsu and Hai Lin Nee of Azure Systems, Inc., of Florida, pled guiltyto submitting a document to the U.S. Government which gave false information regarding the export of 25low noise amplifier chips to a company in the PRC.

The Penalty: On October 6, 2004, defendants were sentenced to three years probation.

Emcore Corporation

The Violation: Between 2000 and 2003, Emcore Corporation made false statements to the U.S. Governmentand violated conditions on export licenses that it had received for exports of Metal Organic Vapor Disposition(MOCVD) tools to the PRC. Further, between 1998 and 2003, Emcore knowingly exported MOCVD toolsto Taiwan without the required export licenses, illegally serviced the tools, failed to file Shipper's ExportDeclarations, and failed to retain certain export control documents.

The Penalty: Emcore agreed to pay a $400,000 administrative penalty.

Mitigating Circumstances: Emcore voluntarily self-disclosed the violations and cooperated fully inthe investigation.


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Kennametal Inc.

The Violation: Between August 1998 and April 2003, Kennametal, in connection with making unlicensedexports of nickel powder to Chile, Peru, Taiwan, and Israel made false or misleading representations on exportdocumentation that was filed with the U.S. Government. Kennametal also failed to comply with reporting andrecord-keeping requirements.

The Penalty: Kennametal agreed to pay a $262,500 administrative penalty.

Zooma Enterprises, Inc.

The Violation: On or about December 24, 1998, Zooma Enterprises and its President, Issa Salomi, made falsestatements to the U.S. Government by listing the country of ultimate destination on a Shipper's ExportDeclaration as Jordan, when the destination was Iraq. Further, Salomi filed a petition with the U.S. CustomsService after its medical equipment was seized that falsely represented facts about the sale of the medicalequipment including its ultimate destination.

The Penalty: Salomi agreed to pay a $24,000 administrative penalty and Zooma agreed to pay an $8,000administrative penalty.

Maria Elena Ibanez

The Violation: Between May 1996 and September 1998, Maria Elena Ibanez caused, aided, and abettedInternational High Tech Marketing (IHTM) in various export control violations, including improperlyavoiding the requirement to file Shipper's Export Declarations by understating values on commercial invoices,submitting falsified Shipper's Export Declarations to the U.S. Government, and supplying its freight forwarderwith undervalued commercial invoices that were used by the freight forwarder to prepare inaccurate SED's andair waybills.

The Penalty: In March 2000, IHTM pled guilty to five counts of export violations in connection with exportsto Libya and Sudan and the false information it provided on commercial invoices. IHTM was fined $250,000for these violations. In her criminal case, Ibanez was sentenced to 18 months probation and a $5,000 fine forconspiring to falsify commercial invoices. In the related administrative case, Ibanez agreed to pay a $115,000administrative penalty and to a five year denial of export privileges. The denial of export privileges wassuspended.

E & M Computing Ltd.

The Violation: E & M of Ramat-Gan, Israel, "loaned" a computer to a customer in Israel until a BIS licensecould be obtained, and then provided false and misleading information in support of the license applicationthat was filed with BIS by the U.S. exporter. E & M then attempted to avoid detection of this unauthorizedtransfer by removing the computer from the end-user when it was notified that BIS officials were planning toconduct a post-shipment verification. In other instances, E & M upgraded computers above the export controlthreshold with CPUs from its own warehouse without the necessary BIS license, and sold or loaned a server toa customer without authorization, after learning that a BIS license was required. Finally, E & M failed todisclose these upgrades to BIS when filing notifications required by the National Defense Authorization Act of


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1998. Further, E & M caused the export of central processing units (CPUs), a workstation, a server, and a highperformance computer to Israel without the required export licenses. E & M evaded the EAR by purchasingcomputers from another vendor after learning that BIS would deny the first vendor's license application toexport the items.

The Penalty: E & M Computing agreed to pay a $165,000 administrative penalty and a three year denial ofexport privileges. The denial of export privileges was suspended.


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Chapter 10 - Antiboycott Violations

Introduction

The antiboycott provisions of the EAR prohibit U.S. persons from complying with certain requirementsof unsanctioned foreign boycotts, including requirements that the exporter provide information aboutbusiness relationships with a boycotted country or refuse to do business with persons on certain boycott

lists. In addition, the EAR requires that U.S. persons report their receipt of certain boycott requests to the BIS.Failure to report receipt of covered boycott requests to BIS can be a violation of the EAR. Under the antiboycottprovisions of the EAR, certain foreign subsidiaries of domestic U.S. companies are considered to beU.S. persons.

For questions about boycott-related matters please contact the BIS Office of Antiboycott advice line at (202)482-2381 or send an e-mail as indicated in the antiboycott compliance section of the BIS website.

D O N ’ T L E T T H I S H A P P E N T O Y O U ! � E X P O R T E N F O R C E M E N T � C H A P T E R 1 0

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An Overview of the Antiboycott LawsHistoryDuring the mid-1970's, the United States adopted two laws to counteract the participation ofU.S. citizens in other nations' economic boycotts of countries friendly to the United States. These"antiboycott" laws were the 1977 amendments to the Export Administration Act (EAA) (ascarried over into the Export Administration Act of 1979) and the Ribicoff Amendment to the1976 Tax Reform Act (TRA).

ObjectivesThe antiboycott laws were adopted to encourage, and in specified cases, require U.S. persons torefuse to participate in foreign boycotts that the United States does not sanction. They have theeffect of preventing U.S. persons from being used to implement foreign policies of other nationswhich run counter to U.S. policy.

Primary ImpactThe Arab League boycott of Israel is the principal foreign economic boycott that U.S. personsmust be concerned with today. The antiboycott laws, however, apply to all boycotts of countriesthat are friendly to the United States imposed by foreign countries.

Who Is Covered by the Laws?The antiboycott provisions of the EAR apply to all "U.S. persons," defined to include individualsand companies located in the United States and their foreign affiliates. These persons are subject tothe law when their activities relate to the sale, purchase, or transfer of goods or services (includinginformation) within the U.S. or between the U.S. and a foreign country. This covers U.S. exports,forwarding and shipping, financing, and certain other transactions by U.S. persons not in the U.S.


Johns Hopkins Health System Corporation

The Violation: Johns Hopkins Health System violated the antiboycott provisions of the EAR when itdiscriminated against a U.S. person in support of the Arab League boycott of Israel. The person had beenseeking a position in the company's International Services Department, which markets medical services aroundthe world, including the Middle East. The discriminatory conduct, BIS believes, was motivated by thecompany's concern about having a Jewish person in that position because of the Arab League boycott of Israel.

The Penalty: Johns Hopkins agreed to pay a $10,000 administrative penalty.

Mitigating Circumstance: Johns Hopkins Health System voluntarily self-disclosed the violation andcooperated fully with the investigation.

Alison Transport

The Violation: On three occasions, in connection with transactionsinvolving the sale and transfer of goods from the United States to Oman,Kuwait, and Saudi Arabia, Alison Transport furnished prohibitedinformation about another company's business relationships in violationof the EAR. Alison also failed to report its receipt of a request from Omanto provide a certificate that the aircraft used in the transactions were notblacklisted by the Arab League Boycott Committee.

The Penalty: Alison agreed to pay a $22,500 administrative penalty.

St. Jude Medical Export GmbH

The Violation: St. Jude violated the EAR when it failed to report in a timely manner its receipt of three requestsfrom an Iraqi government agency to adhere to the rules of the Arab League boycott of Israeli during the 2000-2001 reporting period. On four occasions, St. Jude also violated the antiboycott provisions of the EAR byagreeing to refuse to do business with blacklisted persons.

The Penalty: St. Jude agreed to pay a $30,000 administrative penalty.

Mitigating Circumstance: St. Jude voluntarily self-disclosed the violations and cooperated fully withthe investigation.

Input/Output Exploration Products, Inc.

The Violation: In 1999 Input/Output Exploration Products (UK), Inc., violated the antiboycott provisionsof the EAR when it provided answers to questions from a customer about its business with or in Israel and thebusiness relationships of its parent company with or in Israel. Input/Output also unlawfully agreed to refuseto do business with companies on lists maintained by Arab League countries that boycott Israel, and failed toreport its receipt of boycott requests.

The Penalty: Input/Output agreed to pay a $24,500 administrative penalty.


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Jagro Customs Brokers and International Freight Forwarders, Inc.

The Violation: In January 1998, in connection with a shipment of goods to Bahrain, Jagro furnishedinformation about another company's business relationships with Israel when it furnished a commercial invoicethat contained the statement: "We confirmed that the goods are not of Israeli origin nor do they contain anyIsraeli material." Jagro also failed to report its receipt of the request for such an attestation in violation of theantiboycott provisions of the EAR.

The Penalty: Jagro agreed to pay a $5,700 administrative penalty.

Rockwell Automation, Inc.

The Violation: Rockwell Automation, Inc., a Milwaukee-based company and successor to Reliance ElectricCompany, assumed responsibility for violations of the antiboycott provisions of the EAR committed by DodgeInternational, a U.S. based division of Reliance Electric, as well as antiboycott violations committed by twoforeign subsidiaries of Reliance Electric.

Dodge violated the antiboycott regulations by failing to report a request from a Kuwaiti purchaser for adeclaration from Dodge that the goods at issue did not originate in Israel and that Dodge was not affiliatedwith any Israeli boycotted or blacklisted company. Dodge also failed to maintain records containinginformation relating to a reportable boycott request as required by the EAR's antiboycott provisions.

In addition, the two foreign subsidiaries of Reliance, prior to their acquisition by Rockwell, each violated the EAR'santiboycott provisions by furnishing prohibited information about their or another company's businessrelationships. Specifically, Reliance Electric GmbH furnished information regarding its business relationship withIsrael in a transaction involving a sale to the United Arab Emirates, and Reliance Electric AG furnished informationregarding the blacklist status of the aircraft carrying the goods in a transaction involving a sale to Pakistan.

The Penalty: Rockwell and the two Reliance subsidiaries agreed to pay a $9,000 administrative penalty.

Serfilco, Ltd.

The Violation: Serfilco violated the terms of a denial order imposed byBIS in 1996 by negotiating the sale of goods to companies in the UnitedArab Emirates and Saudi Arabia in 1996 and 1997.

The 1996 denial order was imposed after Serfilco violated the antiboycottprovisions of the EAR by giving information about its businessrelationship with Israel when it responded to a boycott questionnaire froman Iraqi distributor and for failing to report to BIS its receipt of boycott-related requests.

The Penalty: Serfilco agreed to pay a $65,000 administrative penalty. In addition, Serfilco agreed to a threeyear denial of export privileges to Bahrain, Iraq, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Syria,the United Arab Emirates, and the Republic of Yemen.


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McMaster-Carr Supply Company

The Violation: McMaster-Carr failed to report its receipt of boycott-related requests within the time periodrequired by the antiboycott provisions of the EAR. The transactions involved sales of goods from the UnitedStates to Oman, the United Arab Emirates, Kuwait, Qatar, and Saudi Arabia.

The Penalty: McMaster-Carr agreed to pay a $8,000 administrative penalty.


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Chapter 11 - Successor Liability

Introduction

Recent administrative cases have made clear that businesses can be held liable for violations of the EARcommitted by companies that they acquire. Businesses should be aware that the principles of successorliability may apply to them and perform "due diligence" in scrutinizing the export control practices of

any companies that they plan to acquire.

A properly structured due diligence review can determine whether an acquired company has violated any exportlaws. This review should examine the company's export history and compliance practices, includingcommodity classifications, technology exchanges, export licenses and authorizations, end-users, end-uses,international contracts, the status of certain foreign employees who have access to controlled technologies, andthe target company's export policies, procedures and compliance manuals. Failure to properly scrutinize acompany's export practices can lead to liability being imposed on the acquiring company.


Sigma-Aldrich Corporation

The Violation: A company that Sigma-Aldrich had acquired in 1997 madeunauthorized exports of controlled biological toxins to Europe and Asia on numerousoccasions prior to being acquired. A Sigma Aldrich company continued unlicensedexports for more than a year after the acquisition. In denying Sigma-Aldrich's Motionfor Summary Decision, an administrative law judge held that companies can be heldliable for export control violations that have been committed by firms that theyacquire.

The Penalty: Sigma-Aldrich agreed to pay a $1,760,000 administrative penalty.

Saint-Gobain Performance Plastics, Inc. (SGPPL)

The Violation: Between November 1998 and September 2000, SGPPL or Furon Corporation (acquired bySGPPL in 1999) exported controlled Teflon-coated valves and pumps to Israel and Taiwan without the requiredexport licenses from BIS. SGPPL failed to file a Shipper's Export Declaration for some of these shipments andfiled Shipper's Export Declarations for others which falsely indicated that the shipments did not require anexport license. Most of the violations that SGPPL was liable for were committed by the Furon Corporationprior to its acquisition by SGPPL in 1999. Under the principles of successor liability, SGPPL was liable forviolations of export control laws committed by Furon.

The Penalty: SGPPL agreed to pay a $697,500 administrative penalty.


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A Bio Toxin

Symmetricom, Inc.

The Violation: In May 1999, Datum, Inc. (Datum), a company acquired by Symmetricom in 2002, exportedan ovenized quartz crystal oscillator to an organization in India on BIS's Entity List without the required BISlicense. In addition, Datum forwarded the oscillator with knowledge that a violation of the EAR would occurand made a false statement on a Shipper's Export Declaration.

In May 1999, Datum also exported cesium frequency standard equipment and an ovenized quartz crystaloscillator to Malaysia without the required BIS license in violation of the EAR. Datum also made a falsestatement on a Shipper's Export Declaration.

The Penalty: Symmetricom agreed to pay a $35,500 administrative penalty.


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